The role of formal and informal institutions on firms’ export performance: insights from Kosovo

This thesis studies the role of formal and informal institutions in Kosovo in boosting firms' export performance, contributing to a better understanding of the role of institutional building in small developing economies and in their trade performance. By using a pragmatic approach to research, combining data from three sequential stages in a mixed methods design, bringing together two stages of qualitative methods and one large-scale survey, this thesis extends the debates on formal and informal institutions and contributes to the institutional approaches to the questions of firms’ export performance in developing economies. Kosovo is a small developing country, with a deep trade deficit. It received substantial support from international donors, starting from 1999, to build its formal structures from scratch. Today, its legislation and regulations resemble those of developed economies, from Governments and organizations of which economies support was given; the benefits from those formal structures, however, have been slow and have stalled. Over two decades later, the country records the lowest GDP/capita in the European territory, the highest unemployment rate, and its exports cover imports to only about 12%. Combining in-depth interviews with key stakeholders to have insights from within, a large-scale survey of businesses operating in Kosovo, and follow up in-depth interviews with businesses to explore and discuss findings of the survey, this multi-phase research gives stronger evidence and confidence in the findings on how the institutional environment affects the export performance. This thesis finds the perception of corruption creating a negative image of the country, the weak rule of law, unskilled labour force, and the limited access to finance are crucial factors inhibiting the growth of Kosovo firms and their exporting possibilities. Rather than adopting existing successful legislations and reforms, country specific reforms are required, considering multi-faceted interventions and the informal institutions of the country.